How to get capital to start your small business? You’re about to find out ten interesting and highly effective options you can explore.
If you ask ten random people why they haven’t turned their bright business idea into a real life business, eight of them will likely respond with the same answer: ‘I don’t have the capital…yet!’
Raising capital is probably the biggest obstacle many entrepreneurs face in starting a business. It’s both a serious problem and a popular excuse for many business-minded people.
However, the success stories of all the entrepreneurs we have covered on reveal that capital is available to everyone if you know where to look!
Some of the sources of capital we shall explore in this article are very familiar to you while the rest may come off as strange. Nevertheless, they provide hundreds of entrepreneurs like you with the capital they need to start up and grow their brilliant ideas into successful real life businesses.
If you’re having problems raising the capital you need to start a small business, this article is a must-read for you.
Here they are…

1.  Start with your savings

It only makes sense that you put your money where your mouth is. If your idea is as brilliant as you say it is, you should have no problem committing some of your own hard-earned money to it!
Using savings as a source of capital works best for people who already earn some form of income, no matter how little.
If you’re employed for example, you certainly earn an income from the salaries or wages you’re being paid. If you’re a student, it’s very likely that mummy, daddy and big brother often send you some pocket money.
Saving a reasonable part of any money you receive is a good start to raising the capital you need for your dream business.
If you’re really serious about that business dream, you need to start making both small and big sacrifices to ensure that you save more from your pay check. (photo credit:
Using your savings could also help to attract more capital.
It is usually easier to convince your friends, family, investors and banks to give you capital if you already have some of your own money invested in your idea or small business. It’s a sign of confidence and a show of faith that you believe the business idea is worth it.
No matter how much money you earn at the moment, try your very best to set something aside.

2. Talk to friends and family

If you have gathered your savings and find you still need more money, these people are the next best source of capital for your business.
Your friends and family are people you have a strong influence over. They already like and care about you and want you to succeed. They are also willing to listen to your ideas and support you and will often be your first set of true fans and supporters.
Because they are emotionally connected to you, friends and family are willing to take a higher risk to invest in your business unlike banks and investors who consider risk very closely and seriously.
Some of the successful entrepreneurs we have profiled, like Tanzania’s Patrick Ngowi and South Africa’s Colin Thornton, started their businesses with capital invested by friends and family.
Today, Patrick has grown the $1,800 loan he received from his mother into a multi-million dollar solar energy business.
Colin now runs a $10 million revenue company which he started with the $5,000 investment he used to start his computer service business from his parents’ garage.

3. Find a partner who’s got the cash

Most times, having a great idea isn’t all it takes to start a business.
You may have a brilliant business idea, technical skills or brain power to build an amazing product but you still need a partner who has money that you need to make the product and sell it to the market.
When you have a profitable business idea and find a partner who can contribute the capital, both of you bring something to the table and can share ownership of the business.
It’s a win-win situation for both of you!
We’ll give you a quick example of a business partnership success story: is now Nigeria’s leading and most successful job search engine with over one million registered users. The company was started by three university students who decided to partner and make the business idea work.
They all contributed their skills, resources and capital to get the business off the ground in 2009. Today, provides opportunities for millions of people in Nigeria and Ghana to find their dream jobs.
Another great example of a business idea that came alive due to a successful partnership is Iroko TV, the largest online collection of movies made in Africa. While its founder, Jason Njoku, had the brilliant idea, he found a partner in Sebastian Gotter who brought in the critical $30,000 capital that got the business off the ground.
Today, Iroko TV has become a multi-million dollar business, making hundreds of thousands of dollars in revenues every month!

4. Fly on the wings of an angel investor

An angel investor is typically someone who has a lot of ‘free’ money and is willing to invest in your business in return for an ownership stake.
They are popularly known as ‘angels’ in the business world because it’s much easier to raise capital from this kind of investor than any other kind (such as venture capital).
Angels are usually informal business people, or high net-worth individuals (like professional lawyers, engineers or accountants) who are looking for high-return investments. Some of them are experienced entrepreneurs who have become wealthy from the businesses they own but are keen to invest in new startup businesses as a way of helping the next generation of entrepreneurs.
In addition to the capital they invest, angel investors often provide coaching and mentorship which are very important for any young business.
Although it’s relatively easier to get money from angel investors, they usually demand a high stake in your business to compensate for the risk they are taking by investing in your new and ‘untested’ business.
Angel investors are often people you know, or are recommended to you by people who know them. Every wealthy person in your neighbourhood or social circles is a potential target in this regard.

5. Apply for small business grants and loans

Don’t worry, it’s not as scary as it sounds. You may not know it but many governments and international agencies are interested in supporting small and medium businesses (or SMEs) because of the important roles they play in the growth of any country’s economy.
Small businesses generate a lot of employment, improve local technology and produce many products and services that support larger companies and industries.
For these reasons and many more, government institutions and international organisations set up several grants and loans to support small and medium scale businesses in Africa.
The problem is, not many people know about these opportunities or even bother to apply for them.
Applications are usually free and will cost you nothing. Why not give it a try? You’ve got everything to gain if it works out! Just make sure you go through the guidelines and comply with them.
It’s important that you know the difference between grants and loans.
Grants, unlike loans, do not attract interest and will not be repaid. However, grants can often require more paperwork than loans. There is a very HUGE likelihood that there are government grants and loans available for small businesses and startups in your country.
In a recent article, we have profiled fifty organisations that provide capital and financial support to entrepreneurs and small businesses in Africa. You will find it here: Get Funded! 50 Organisations That Can Give You Capital To Start and Grow Your Business in Africa

6. Use your assets

An asset is any property or thing of value that you own. Many of us have high-value possessions and assets which we can often survive without – things like jewelry, extra cars, houses and undeveloped land.
These assets are a good source of capital because you could either use them as collateral (security) for a bank loan or you could just sell them to realize the capital that you need to start your business.
Very often, taking the decision to sell some of these assets is difficult because we have emotional attachments to them. Many of them are connected to strong memories, or speak to our taste for fashion and social class. (photo credit:
Whatever the case, you will be the person to decide if selling that piece of property your grandfather gave you is a worthy sacrifice for realising your business dream.
It’s really about your priorities and your appetite for risk.
It is expected that if your business becomes a success (which we hope it will), you would be able to buy bigger and better assets than the ones you ‘sacrificed’ to raise capital.
Although this looks like a logical choice to make, it’s often very difficult for some entrepreneurs. If you can’t go through with it, you could easy use any of the other nine sources of raising capital in this article.

7. Get advance funding from customers

This is one of the few ways of starting or running a business with zero capital. Customers with an urgent or desperate need for a product or service are often willing to pay the full price (or part of it) in advance.
This ‘upfront’ payment usually provides you with the capital you need to produce the product or service, get it delivered to the customer and turn a nice profit.
This method of raising capital usually works best for businesses that do not require any capital investment to start up. If you don’t require any capital to get an office space, buy equipment or lease a factory, then you can really start a business from scratch using advance funding from customers.
Service businesses like consulting and software/mobile app development often require the customer to pay some money in advance.
Supply contracts with some companies often allow a ‘mobilization fee’ to be paid to the contractor before the actual work starts. These payments for ‘work not yet done’ are a great source of startup and working capital for entrepreneurs.

8. Enter for a ‘business plan’ or ‘entrepreneurship’ competition.

You would be amazed at the number of business plan competitions that are available every year for African entrepreneurs and small business startups.
Many of us don’t even know about them.
All kinds of local and international organisations put these competitions together to encourage and boost small and medium scale businesses on our continent.
Governments, foundations, the United Nations are just a few of the big names behind some of these contests.
Kenya’s Lorno Rutto is one of many African entrepreneurs who raised startup capital by winning a business plan competition/entrepreneurship contest.
In 2011, she won prize money in the Cartier’s Women Initiative Award (Sub-Saharan Africa category). This prize money provided the capital she needed to expand her recycling business which converts plastic waste from the streets of Kenya’s capital (Nairobi) into fencing posts.
Today, her business (Ecopost) has created over 7,000 fencing posts, 500 new jobs, generated more than $150,000 in annual sales and saved over 250 acres of forests that would have been cut down.
To enter for these competitions is easy. First, you need to make sure you read the rules guiding the competition to confirm that you are eligible to enter the contest. Above all, you should have a well-prepared business plan that presents your brilliant idea or business in a simple, interesting and convincing format.
There are hundreds of business plan competitions out there to choose from. A good place to start would be HERE.
Remember, even if you don’t win the competition, you could attract a lot of attention to yourself and your business idea and there’s no telling what good thing can happen from there. Your bank and angel investors may come knocking at your door!

9. Try Crowdfunding

Crowdfunding (also known as crowd financing) is a new and fast spreading way of raising startup capital.
Instead of focusing on just a few people (banks, friends and partners), crowd financing allows you to raise small amounts of money from many people (a crowd) at the same time.
Although this practice has existed for a long time, the spread of the internet has taken crowd funding to a whole new level. It’s amazing at how much you can raise in a very short time with this method.
The way it works is simple.
You present your business idea or proposal to a ‘crowd’ by posting it on a website (see next paragraph for examples of the best crowdfunding platforms). Your proposal is supposed to convince potential investors and offer them a certain percentage of ownership in your business should they decide to invest.
Another version of crowd financing allows interested investors to offer you capital for which you will pay back with some interest.
No matter the structure, the eventual goal of crowd funding is that it allows ordinary people from across the world to offer you the critical capital you need to start and grow your business.
The short 3-minute video below is a quick and interesting introduction to how crowdfunding works. Crowdfunding may have several variations but the basic principle is still the same.
Some of the noteworthy crowdfunding platforms out there are:,, US and UK), and

10. Yes, you should approach your bank!

Our banks have become notorious for saying ‘No!’ to business loan applications by small businesses and startup entrepreneurs.
However, you must understand that banks make most of their money from the interest they charge on loans. So, why is it difficult to get a loan to start your small business while large companies find it so easy?
The answer is quite simple – high risk.
(photo credit:
Unlike a large company which has been in business for a while and has proven that it is profitable, your new (startup) business is the opposite. Given both options, banks usually prefer to lend to a low risk customer (like an established company) that would almost certainly pay back.
Again, we’re sure you’ve heard of the research statistics that reveal that over 90 percent of startup business fail within their first five years. That’s a lot of risk and most banks will often not want to take it.
So, are we saying there’s no hope for startup companies and small businesses to get a loan from the banks? Of course not!
We’ll give a quick success story of a bank loan to a small business owner.
From a small pig farm which she started in 2004 with only $100, South Africa’s Anna Phosa received a $2.5 million dollar loan from ABSA Bank to enlarge her business.
What did she do differently?
Here’s what she did: She got a contract to supply 100 pigs a week to Pick ‘n Pay, one of South Africa’s largest supermarket chains. With a contract in hand and a credible large company behind her, Anna had significantly reduced the high risk that would have made her bank throw away her loan application.
From just four pigs, her new farm, which sits on a 350-hectare space, now holds nearly 4,000 pigs at a time. Anna currently employs about 20 staff and has become something of a celebrity pig farmer on the continent!
To get a loan from the banks, you need to understand that they are more interested in low risk businesses. Anything you can do to reduce your ‘high risk’ as a startup will definitely give your loan application a greater chance of success.
We reveal more secrets and tips that will help you successfully get a bank loan in our article: How to apply for a small business loan from your bank and get it approved!

Now you know how to get capital to start your small business. Still having any problems?

We hope your excuses about raising capital to start a business have found some answers in this article.
Before we celebrate just yet, we’re sure there are some of you out there who may have a couple of questions and reactions.
No matter your experience with any of these methods of raising capital, we want to hear them. You never know, we may just be changing someone’s life somewhere.
Credit: Small Starter